The budget plan that President Bush outlined this week simply doesn't add up. Making matters worse, if he does get this bill through, his tax cuts will be virtually locked into political concrete. The president will surely not repeat his father's politically suicidal step of raising tax rates in the future, even if changed economic or budgetary conditions require such a course.Skip to next paragraph
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Why is the Bush budget so irresponsible? Admittedly, the tax cuts would only consume about one-third of the total projected surplus over the next decade, and the country could retire most of its debt in the meantime. But of course, those projections assume that a crashing NASDAQ, escalating healthcare costs, and external shocks will not deflect us from a rosy outcome. They could well be wrong.
Even if economic conditions prove as good as now expected, Mr. Bush's numbers still do not compute. In fact, he seems to recognize as much - insisting that debates over Social Security privatization, strengthening the military, and improving healthcare await passage of his tax cut. Otherwise, he rightly fears, the public could grow disenchanted with his latter-day voodoo economics when it discovers that he has promised far more than he can deliver.
Consider the $3 trillion or so in projected non-Social Security surpluses for the next decade. Bush's tax cut - combined with the added interest that the federal government would have to pay if it passed such a bill - would cost about $2 trillion. Can the remaining $1 trillion, admittedly a lot of money, do everything Bush wants it to do?
The answer is clearly no. Starting with defense, Clinton administration plans would themselves require about $0.5 trillion of the remaining projected surplus. Although they might be scaled back by Secretary of Defense Donald Rumsfeld later this year, Bush came to office pledging to strengthen the military. Making good on that pledge and plans to deploy a missile defense system mean that Bush will have to spend at least $0.3 trillion more on the nation's armed forces, no matter how ingenious Mr. Rumsfeld proves to be.
As William Gale of the Brookings Institution has observed, sustaining domestic programs in education, transportation, and other areas would require about $0.4 trillion more over the next decade. That is because the United States population is growing, so to provide the same level of services per person, spending needs to go up faster than the rate of inflation.
Then there are the trust funds for Medicare and for federal employee pensions. Each is expected to garner about $0.4 trillion over the next decade. Since Medicare is a sacred trust with the nation's elderly, and since federal workers have every right to their pensions, these funds should probably not be spent. Instead, they should be saved so that they are available when needed.
Combining the numbers, in rough terms one has nearly $2 trillion consumed by tax cuts, $0.3 trillion in defense, $0.4 trillion in various domestic programs (not counting Social Security or other entitlements), $0.4 trillion in Medicare surpluses, and $0.4 trillion in federal pension surpluses that real people will expect to collect someday.
Adding in Bush's education plan, those numbers exceed projected surpluses by at least half a trillion dollars - meaning that we are probably headed back to deficits if we pass Bush's proposed tax cut.
And the numbers do not even include the extra hundreds of billions of dollars that would be needed to partially privatize Social Security without cutting current beneficiaries' benefits in the meantime.
Add all this up, and one is left with fiscal irresponsibility, plain and simple.
Michael O'Hanlon is a senior fellow at the Brookings Institution, specializing in defense and budget issues.
(c) Copyright 2001. The Christian Science Publishing Society